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PeopleSoft's Courtroom Confession

PeopleSoft's board is willing to talk about a deal if the price is right.

You'd think that after the disaster Jean-Marie Messier created at Vivendi(NYSE:V) by overhyping the prospects of an aging French water utility, no executive would ever again resort to lying about his company's prospects.

Yeah, you'd think, but we don't live in fantasyland. So I guess you can color me unsurprised that the reason Craig Conway was fired as CEO of business software maker PeopleSoft(NASDAQ:PSFT) was because... wait for it... he was less than honest in describing PeopleSoft's sales prospects. Oops.

The dirty laundry was aired yesterday at the opening of the trial in Oracle's(NASDAQ:ORCL) suit to remove anti-takeover provisions that would allow it to move forward with a $7.7 billion hostile acquisition of PeopleSoft. Director Steven Goldby took the stand and described how Conway misled analysts in September 2003 when he said that Oracle's bid was having no impact on sales. Goldby also said that the board took action shortly afterward, amending his comments in a transcript filed with the Securities and Exchange Commission.

But Conway didn't get into hot water until recently, when in a deposition relating to the trial he gave his reasons for stretching the truth. A report at Forbes.com quotes Conway saying in the deposition that he was "promoting, promoting, promoting." And that he decided to brush off the impact Oracle's bid was having on sales because he was "hoping for a self-fulfilling prophecy."

Are you kidding me? News flash, folks: Denial isn't a strategy and is best reserved for the dark sitcoms making the rounds on HBO. It's as if Conway was planning a guest spot on Curb Your Enthusiasm rather than running a $2 billion a year software firm. No wonder the board fired him.

Of course, amid the comedy is an important lesson for investors: Run away from any firm that gets so caught up in promoting itself that it takes its eye off business fundamentals. That's probably what happened with PeopleSoft under Conway. New CEO Dave Duffield is unlikely to let that happen again, but it's probably too late for it to matter.

Indeed, in follow-up testimony this morning Goldby admitted that PeopleSoft's board would be willing to talk about a deal if the price were right and the acquisition could be closed quickly. Does anyone doubt the database king will agree to those terms? I don't.

Fortunately, a federal judge decided that Oracle could go ahead with its bid.

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Author

Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At Fool.com, he covers disruptive ideas in technology and entertainment. Find him online at timbeyers.me or send email to tbeyers@foolcontractors.com. For more insights, follow Tim on Twitter.